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Recently VAT collection was changed for electronic services. Before you simply charged your countries applicable tax rate, unless a VAT ID was provided. Now you

by linohh 8y ago

Recently VAT collection was changed for electronic services. Before you simply charged your countries applicable tax rate, unless a VAT ID was provided. Now you have to charge the VAT rate applicable to your customers country of residence, forcing every vendor to care for and implement correct VAT rates and regulations for all your products and every of the 28 countries in the EU - possibly even more due to bilateral free market agreements with Norway, Switzerland and the like. This is way more complicated than you might think, as improper tax collection may constitute felony charges and fines, leaving small businesses and startups in an awkward spot where not selling to other eu countries is easier than selling to them in a compliant way, putting the idea of a single market ad absurdum. The last thing you would want is pointless market entry barriers affecting every entity offering cross border sales.

p49k 8y ago
Seems like something that could be greatly simplified to the point of being a non-issue by software (either standalone or a service), and if one doesn’t already exist, seems like a good opportunity. This is similar to how state taxes work in the US and many small businesses manage.
- ramraj07 8y ago
  Isn't it just as simple as tax it if you have an actual store in-state and don't if not?
  - deleted 8y ago
    [deleted]
- pawodpzz 8y ago
  Gumroad handles VAT-EU for you[0] but I didn't tried it. If anyone worked with them, here are some questions I have: - do they send one monthly payment? If so, from which country? - is VAT-EU number needed? - if I don't register for VAT (don't reach yearly selling threshold), do I get full payout? Are clients charged for VAT in such scenario? - what documents do I get from them, in case of tax office review? - is 3.5% + $0.30 fee applicable to EU customers or is there some additional cost (I assume not, but I ask just to be sure)? - if I sell digital product, what should I do about e.g. Canadian/Indian/Japanese/whatever sell taxes? [0] http://blog.gumroad.com/post/110080508463/vat http://blog.gumroad.com/post/110080508463/vat
tluyben2 8y ago
Fines yes but felony charges? Any references to that for the weird EU VAT of that actually happening unless it was deliberate, large scale avoidance? I messed up with it a lot but (obviously) accidentally and on a small scale; I get a slap on the wrist and some back taxes when audited. Not even fines.
- jwr 8y ago
  I don't know about other countries, but in Poland the tax authorities are pretty strict, especially where VAT is concerned. It's good, because things are becoming clean and predictable, but you really do not want to get things wrong. You won't go to jail of course (unless you've defrauded bajillions), but fines and regular inspections will hurt your business pretty quickly. Doing VAT wrong is really not an option.
- linohh 8y ago
  Yep. Of course you’ll have to be negligent if not willfully wrong in your returns. But VAT ain’t nuthin’ to fuck with. It will come back to you.
  - tluyben2 8y ago
    Well, I know a lot of small companies in NL from friends and people I met who are simply sloppy and negligent with VAT and taxes in general but not willfully wrong and nothing at all happens. Slap on the wrist and fines. Same in Spain (much higher fines). So ok, I see in theory it can happen but is there any case where this actually happened in the EU unless it was willfully wrong or fraud in some huge company with an accountants scandal?
    - linohh 8y ago
      At least in Germany this highly depends on your responsible internal revenue office (Finanzamt) which May Even vary within city limits. And of course there have been trials for seemingly trivial amounts of money never justifying the cost of persecution or tax auditing. While it may not put you on top of the most wanted list, there still is a risk and it’s not to be underestimated. Even though cum ex etc show ridiculously failing the checks and balances are
jdietrich 8y ago
I found the VAT place of supply rules to be inconvenient but reasonably straightforward to comply with. Several billing platforms will collect VAT across the EU on your behalf, or there are third-party solutions that will integrate with your own payment gateway. I have no idea what the situation is in Poland, but there's no such thing as a "felony" in my country; an honest mistake on my tax return is an honest mistake, not a criminal offence. I'd only be criminally liable if I was unreasonably negligent or acted with the deliberate intent to deceive. As long as I a) record the customer's country for each transaction and b) fill out my VAT MOSS return accordingly every quarter, the tax authorities (HMRC) are perfectly happy. https://quaderno.io/resources/eu-vat-guide/ https://quaderno.io/resources/eu-vat-guide/

by linohh 8y ago

p49k 8y ago

Seems like something that could be greatly simplified to the point of being a non-issue by software (either standalone or a service), and if one doesn’t already exist, seems like a good opportunity. This is similar to how state taxes work in the US and many small businesses manage.

ramraj07 8y ago
Isn't it just as simple as tax it if you have an actual store in-state and don't if not?
- deleted 8y ago
  [deleted]
pawodpzz 8y ago
Gumroad handles VAT-EU for you[0] but I didn't tried it. If anyone worked with them, here are some questions I have: - do they send one monthly payment? If so, from which country? - is VAT-EU number needed? - if I don't register for VAT (don't reach yearly selling threshold), do I get full payout? Are clients charged for VAT in such scenario? - what documents do I get from them, in case of tax office review? - is 3.5% + $0.30 fee applicable to EU customers or is there some additional cost (I assume not, but I ask just to be sure)? - if I sell digital product, what should I do about e.g. Canadian/Indian/Japanese/whatever sell taxes? [0] http://blog.gumroad.com/post/110080508463/vat http://blog.gumroad.com/post/110080508463/vat

tluyben2 8y ago

Fines yes but felony charges? Any references to that for the weird EU VAT of that actually happening unless it was deliberate, large scale avoidance? I messed up with it a lot but (obviously) accidentally and on a small scale; I get a slap on the wrist and some back taxes when audited. Not even fines.

jwr 8y ago
I don't know about other countries, but in Poland the tax authorities are pretty strict, especially where VAT is concerned. It's good, because things are becoming clean and predictable, but you really do not want to get things wrong. You won't go to jail of course (unless you've defrauded bajillions), but fines and regular inspections will hurt your business pretty quickly. Doing VAT wrong is really not an option.
linohh 8y ago
Yep. Of course you’ll have to be negligent if not willfully wrong in your returns. But VAT ain’t nuthin’ to fuck with. It will come back to you.
- tluyben2 8y ago
  Well, I know a lot of small companies in NL from friends and people I met who are simply sloppy and negligent with VAT and taxes in general but not willfully wrong and nothing at all happens. Slap on the wrist and fines. Same in Spain (much higher fines). So ok, I see in theory it can happen but is there any case where this actually happened in the EU unless it was willfully wrong or fraud in some huge company with an accountants scandal?
  - linohh 8y ago
    At least in Germany this highly depends on your responsible internal revenue office (Finanzamt) which May Even vary within city limits. And of course there have been trials for seemingly trivial amounts of money never justifying the cost of persecution or tax auditing. While it may not put you on top of the most wanted list, there still is a risk and it’s not to be underestimated. Even though cum ex etc show ridiculously failing the checks and balances are

jdietrich 8y ago

I found the VAT place of supply rules to be inconvenient but reasonably straightforward to comply with. Several billing platforms will collect VAT across the EU on your behalf, or there are third-party solutions that will integrate with your own payment gateway. I have no idea what the situation is in Poland, but there's no such thing as a "felony" in my country; an honest mistake on my tax return is an honest mistake, not a criminal offence. I'd only be criminally liable if I was unreasonably negligent or acted with the deliberate intent to deceive. As long as I a) record the customer's country for each transaction and b) fill out my VAT MOSS return accordingly every quarter, the tax authorities (HMRC) are perfectly happy. https://quaderno.io/resources/eu-vat-guide/ https://quaderno.io/resources/eu-vat-guide/